July 18, 2012

Medicaid Fraud Bust Goes Down In New York

A group of individuals was recently busted in New York for a drug fraud scheme related to Medicaid prescriptions.

According to NBC New York, the individuals allegedly bought medication that was legally prescribed to Medicaid participants, used a number of middlemen to move the pills, and then resold the prescription drugs repackaged to a number of pharmacies for a hefty profit. Approximately 48 people have been charged for being involved in the fraud ring. Medicaid is the medical insurance program for those who are disabled and poor.

"The scheme was a theft, pure and simple, from a program funded by taxpayers," Janice K. Fedarcyk, head of the FBI's New York office, told the Star Tribune.

In the scheme, Medicaid recipients would receive monthly prescriptions for little or no cost. These individuals then sold their medication that was legally prescribed to aggregators on bodegas and street corners through New York City. Medications included drugs to treat AIDS, asthma, and schizophrenia. Upper level “collectors” and “aggregators” who would peddle the drugs to distribution channels that were based in Alabama, Florida, Nevada, Texas, and Utah would then buy these “second-hand drugs” The drugs were resold to pharmacies and wholesale prescription drug businesses in Arizona, Illinois, Kentucky, Hawaii, Massachusetts, Minnesota, Mississippi, New Jersey, New York, Pennsylvania, Puerto Rico, and South Carolina.

The FBI Health Care Fraud Task Force charged and arrested the individuals for federal Medicaid fraud, mail fraud, and wire fraud charges. Many were based out of New Jersey, New York, and six other states. The FBI, DEA, NYPD, and other state and local agencies participated in the task force. According to the complaint filed in Manhattan federal court, the investigation also relied on a cooperator who was arrested last June during a storage facility raid in New Jersey.

The Star Tribune also stated that the FBI took over 250,000 pills that were worth approximately $16 million. The drug bottles were changed to look as if they came from real distributors; specifically, labels with the patients´ names and backdating expiration dates were removed. Prosecutors believe that the scheme is possibly dangerous for consumers who are unaware as sometimes second-hand prescription have possibly hazardous chemicals during the relabeling process among other factors. Authorities believe that there have not been any reports of anyone harmed by the drugs.

"The scheme posed serious health risks at both the collection and distribution ends," Fedarcyk said in a statement. "People with real ailments were induced to sell their medications on the cheap rather than take them as prescribed, while end-users of the diverted drugs were getting second-hand medicine that may have been mishandled, adulterated, improperly stored, repackaged and expired."

The scheme has huge costs for the Medicaid. Reuters states that the scheme could lead to a $108 million loss for Medicaid. Over a seven-year period, that could amount to as much as $500 million. The cases are listed as USA v. Alex Oria et al and USA v. Juan Viera et al, U.S. District Court, Southern District of New York, Nos. 12-mag-1854 and 11-cr-1072.